By Heather M. Bessinger and Nathaniel Cade, Jr.
The American Law Institute promulgated the Restatement (Third) of Torts: Product Liability in 1998, but Wisconsin continues to resist its adoption. Our Supreme Court states that the Restatement (Third), at best, represents an unnecessary departure from the strict liability standard set forth by the Restatement (Second) of Torts, and at worst, is a politically motivated attempt to advance the tort reform movement. A closer look at the Restatement (Third), however, reveals that it is a better representation of prevailing product liability laws in the U.S. than our court wants to believe, and merits closer consideration.
Significant changes in product liability law have occurred since Wisconsin adopted Section 402A of the Restatement (Second) in the late 1960s. Section 402A was innovative in that it recognized that product liability lawsuits have a stronger correlation to tort claims than contract claims, and established strict liability in tort. Along the way, Wisconsin also adopted the “consumer expectations” test, under which a product is not defectively dangerous “[i]f the average consumer would reasonably and fully appreciate the attendant risk of injury.” Vincer v. Esther Williams All-Aluminum Swimming Pool Co., 69 Wis. 2d 326, 332, 230 N.W.2d 794 (1975).
This widely-adopted test is the basis for most product liability cases decided in Wisconsin since the late 1960s.
The drafters of the Restatement (Second) could not have predicted the developments in product liability litigation that occurred over the last 40 years, such as the dramatic increase in design defect litigation. Recognizing the shortcomings of §402A, ALI intended the Restatement (Third) to completely supersede it. One of the most notable updates in the Restatement (Third) is the recognition of the three distinct categories of defects: manufacturing, design and failure to warn. The Restatement (Third) also limits strict liability to cases involving manufacturing defects and applies what amounts to a negligence standard to design and warning defects.
One of the most controversial aspects of the Third Restatement, however, is the apparent abandonment of the consumer expectation test in favor of a “risk-utility” test. The risk-utility test finds a product defective as designed only if the magnitude of the risk created by the design is greater than the utility of the product. Restatement (Third) of Torts: Products Liability sec. 2(b). Under the risk-utility test, the plaintiff need only show that the design of the product was the proximate cause of his injury, and the burden then shifts to the product manufacturer to demonstrate that the benefits of the particular design outweigh the risks.
In reality, the risk-utility test does not necessarily preclude simultaneous consideration of the consumer expectations test in product liability claims. Instead, the consumer expectations test is one of many factors the risk-utility balancing test considers with respect to design and warning defects. Section 2(b), comment g, notes that “[w]hile disappointment of consumer expectations may not serve as an independent basis for allowing recovery . . . neither may conformance with consumer expectations serve as an independent basis for denying recovery.”
Despite the ALI’s hard work in creating a restatement that more accurately reflects the current state of the law, the Wisconsin Supreme Court consistently refuses to adopt the Third Restatement, most notably in Green v. Smith & Nephew AHP, Inc., 2001 WI 109, 245 Wis.2d 772, 629 N.W.2d 727. In Green, the court declined to apply the risk-utility test set forth in Section 2(b) of the Restatement (Third), reasoning that the Third Restatement was at odds with established precedent, and finding no grounds that would justify abandoning Section 402A. In declining to adopt the Restatement (Third), the court stated that incorporating an element of foreseeability of the risk of harm and the risk-benefit test was “fundamentally at odds with current Wisconsin products liability law.” Green, at par. 72.
The Supreme Court once again noted its distaste for the Restatement (Third) in Badger v. Haase, 2004 WI 97, 274 Wis.2d 143, 682 N.W.2d 389. There, the court refused to affirm the lower courts’ application of Section 5 of the Restatement in a design defect case. Previously, both lower courts adopted Section 5 of the Restatement (Third) because it represented a “logical extension of…Section 402A.” The Supreme Court declined to adopt Section 5, but noted that the end result was the same under either Restatement.
In 2007, the Court of Appeals in the lead paint case of Godoy v. E.I. Du Pont de Nemours & Co., 2007 WI App 239, par. 8, 306 Wis.2d 226, 743 N.W.2d 159, discussed the Restatement (Third) in dicta to illustrate how the Restatement (Third) “can help illumine our inquiry.” Like Badger, the court observed that it would not have imposed liability on the defendants under either restatement. In its review of Godoy, the Supreme Court observed that “the Restatement (Third) may offer new insights into product liability,” but then applied Section 402A without any further analysis. Godoy v. E.I. de Pont de Nemours and Co., 2009 WI 78, par. 18, 768 N.W.2d 674. Other recent instances where the courts have demonstrated continued reluctance to adopt the Restatement (Third) include Horst v. Deere & Co., 2009 WI 75, 319 Wis.2d 147, 769 N.W.2d 536, and Tatera v. FMC Corp., 2009 WI App 80, 768 N.W.2d 198.
Is the reluctance of Wisconsin courts to adopt the Restatement (Third) justified? In the opinion of the authors, the answer is no. Nor is the reluctance to adopt certain parts. For example, many states have adopted certain portions of the Restatement (Third), while others state have codified portions of the Restatement into their statutes. The Iowa Supreme Court explicitly adopted Sections 1 and 2 of the Restatement (Third) in 2002. Wright v. Brooke Group Ltd., 652 N.W.2d 159, 169 (Iowa 2002). After declaring the consumer expectations test to be “inadequate” for design defects and failure to warn defects, the court instead chose to analyze defects based on negligence principles and the risk-utility balancing test as suggested by Section 2 of the Restatement (Third). California was an early adopter of the risk-utility test, and is credited by many as being the test’s creator. Like Iowa, California has not abandoned the consumer expectations test. Rather it held that the consumer expectations test can only be used in narrow circumstances with respect to design defects, and then only as a consideration when applying the risk-utility test, as suggested by the Restatement (Third). Morson v. The Superior Court of San Diego County, 90 Cal.App. 4th 775, 794, 109 Cal.Rptr.2d 343 (2001). Illinois also has chosen to continue applying the consumer expectations test in certain circumstances, while also adopting the risk-utility test. Blue v. Environmental Engineering, 215 Ill.2d 78, 109-110 (2005).
Wisconsin courts have recognized in both Badger and Godoy that applying the Restatement (Third) instead of the Restatement (Second) often results in the same outcome, thereby bolstering the argument that the Restatement (Third) is an accurate reflection of current product liability law that the courts should welcome. By taking a single section from the Restatement (Second), breaking it into twenty-two parts and including significant commentary, the Restatement (Third) provides the missing link that reflects forty years of judicial interpretation of products liability law. Perhaps now is the time for the Wisconsin courts to step forward and recognize this.
Heather M. Bessinger (Loyola Chicago ’09) is a litigation associate at Michael Best & Friedrich LLP in the Milwaukee office.
Nathaniel Cade, Jr. (Michigan ’96) is a partner with Michael Best & Friedrich LLP, in Milwaukee. His practice focuses on products liability and complex litigation, and he currently co-chairs the Products Liability Committee of the ABA’s Section of Litigation.